Consulting industry of Asia and Australia grows 6% to $50 billion

26 September 2018 Consultancy.uk

The consulting industry of the Asia Pacific, consisting of Asia, Australasia and a number of other very small markets, is expected to grow by 6% in 2018 to hit a market value of $50 billion. The market has seen consistent growth of more than 6% since 2015, but while this has primarily been driven by the growing economic clout of China and India, the largest consulting markets in the region remain Japan and South Korea.

North America – the United States and Canada – is by a distance the largest region for consulting firms, making up for around 55% of the globe’s $277 billion industry, followed by Europe, according to analysis by Consultancy.asia based on data sourced from ALM. When it comes to growth however, then it is Asia Pacific which is at the forefront of the industry. With a market size of $47 billion last year, Asia Pacific accounts for around 17% of the globe’s management consulting industry, and that figure is set to rise fast.

The Asia Pacific region covers a large and diverse portion of the world, spanning two continents and a myriad of geographical conditions and cultures. It encompasses East, South and South East Asia – including India, China and a host of other booming markets – and Oceania, which is most notable for hosting Australia and New Zealand, but also including a myriad of Pacific island nations across the Melanesia, Micronesia and Polynesia micro-regions.

Lifted by rapidly growing economies such as China – which saw expansion of 12% in 2017 – Hong Kong and Singapore, Asia Pacific has improved consistently since 2015 by between 6% and 7% each year. While the average is not markedly higher than North America or some of Europe’s more mature consultancy industries, it represents an average of Asia Pacific, a region which includes 58 territories – some of them incredibly small. Beyond the average within the data set, there are clear countries and regions that are steaming ahead of the rest.

Size of the Asia Pacific management consulting market ($ / billion)

Southern Asia, which consists of India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, the Maldives and British Indian Ocean Territory, grew by 30% between 2015 and 2017. This was pushed forward largely by India, where controversial Prime Minister Modi’s pro-business policies driving up demand for management consultants. While the Government makes efforts to eliminate wasteful activity in the public sector and government-run enterprises, large Indian companies as well as multinationals have been quick to respond to these changes by accelerating digitisation efforts, to the benefit of both IT and digital consultants alike. At the same time, neighbouring Pakistan is enjoying increased trade with China, made possible by recent efforts between the two countries to create a maritime Silk Road.

Elsewhere, Southeast Asia’s management consulting scene is also booming. Spanning countries such as Indonesia and Vietnam, the region enjoyed 25% growth between 2015 and 2017. At the same time, in Indonesia, low internet penetration rates and subpar bandwidth quality has finally prompted the Government to pledge more money to IT infrastructure investments. Alongside a coming boom in digital, which will be supplemented by this, the country is also expected to witness a bump in HR advisory spend due to the rollout of new Sharia compliant retirement investment plans.

By far the hottest consulting market in the region at present is Vietnam, however, where the conservative government has defied all expectations by committing itself to a far-reaching reform agenda. The mixed economy is seeing a diversity of reforms, from labour law shifts to the rate of corporate tax being slashed, while several textile and footwear factories were established with state backing. Basic manufacturing companies, who no longer consider China cheap, are subsequently being drawn to Vietnam by these reforms, increasing advisory demand across all service lines as multinationals look to take advantages of the lighter regulations.

The consulting market of China and Mongolia expanded by 24% in the two years studied, and for 2018 and 2019, 11% growth per annum is forecasted. Despite management consulting only being introduced from Western countries to China in the 1980s, as part of the nation’s sweeping marketisation, China’s consulting market has continuously outpaced its economy. Last year this saw it growing at a double digit rate to reach a total market value of $4.5 billion. The Chinese consulting industry is now larger than its international equivalents in France and Australia, according to estimates from Source Global Research.

Management consulting market of Asia Pacific – by region

In Greater China, most mature consulting markets are Taiwan and the special administrative regions of Hong Kong and Macao, while mainland China still has long way to go but rapidly developing consulting market. Hong Kong and Macao are both largely focused on their financial services industries. Singapore’s heavily financial services dependent consulting sector is similarly booming on the back of its position as a key finance hub in the region, helped out by a buoyant cryptocurrency scene.

Mongolia’s management consulting market is highly dependent on mining and natural resources sector. The rightward political shift of several governments in North America and EMEA will prompt natural resource firms to examine the implications for renewable technology mandates. Rare earth minerals are critical inputs to these technologies and the weakening of mandates by new administrations can result in a significant curtail in demand. These companies are expected to hire consultants to conduct operational improvements and corporate strategy to better navigate the uncertain regulatory climate.

Despite all this rapid change, Japan and South Korea remain the largest consulting market across Asia Pacific. The pair grew by 6% in the past two years, the average rate of the combined market, of which they constitute 44%. In Japan and Korea the consulting market remains largely centred on IT and operations work. In South Korea, the struggling shipping market means restructuring is high on agenda in the maritime sector particular, while relations with North Korea warm, potentially offering up a long-term boost of cross-border employment. In Japan, meanwhile, the economy is in a phase of sustained economic expansion despite deepening labour shortages and the threat of a global trade war. With these factors on the horizon, however, companies are seizing on their economic momentum to prepare for trouble ahead, by engaging consultants.

Further south in Australasia, Australian consulting continues to be largely dependent on the country's natural resources and power industry, which accounts for close to half of its total consulting market urgency felt by natural resource firms to restructure is expected to boost demand for crisis and recovery and post-integration consulting work. While it continues to grow, at the same time, public sector consulting may come up against significant headwinds moving forward. With vociferous business advocate Malcolm Turnbull having been ousted as the country’s Prime Minister earlier in 2018, significant public scorn has been poured over the Australian Government’s consulting spending, and with an increasingly unstable coalition currently ruling the nation’s Parliament, justifying this could become far less easy.

For more information on the developments in Asia Pacific’s management consulting industry, read the article 'Asia Pacific consulting industry breaks $50 billion barrier' on Consultancy.uk’s regional sister platform, Consultancy.asia.

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Accenture's push into the creative sector is an identity crisis

18 April 2019 Consultancy.uk

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.